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Yes. Use it when you're outside somewhere, find a place where the walls are sparkling, and get digging!
It may be a while until you find a Water Stone, but keep digging and you should find one eventually. ^_^
You can find them in the walls of the Underground.
You don't get the Explorer Kit until later on in the game, though, so it could be a while until you find one.
I'm afraid I don't have a Steel Coat, sorry!
In Platinum, I think Byron gives you one on Iron Island when you get the National Pokedex... I would get one from him then give it to you, but I really want to use it to get a Scizor, sorry...